The National Prosecution Service (NPS) has found probable cause to indict Rappler Holdings Corporation (RHC), its President Maria Ressa, and its independent Certified Public Accountant Noel A. Baladiang for violation of the National Internal Revenue Code or the Tax Code.
In a Resolution dated 2 October 2018, Assistant State Prosecutor Zenamar J.L. Machacon-Caparros upheld the complaint filed by the Bureau of Internal Revenue (BIR) against RHC and Ressa for willful attempt to evade or defeat tax and willful failure to supply correct and accurate information under Sections 254 and 255, respectively, of the Tax Code.
In its complaint, the BIR alleged that RHC, Ressa, and one other respondent, RHC treasurer James C. Bitanga, did not reflect in RHC’s 2015 tax returns the total gain of almost P162.5M which it realized from its issuance of Philippine Depositary Receipts (PDR) to NBM Rappler L.P. (NBM Rappler) and Omidyar Network Find L.L.C. (Omidyar).
A PDR is a security which grants the holder the right to the delivery or sale of the underlying shares of stock. It derives its value from an underlying asset. As such, its value depends on the value of its underlying asset - which is the shares of stock of a corporation.
The BIR alleged that on various dates between 2014 to 2015, RHC purchased a total of 119,434,438 common shares from Rappler, Inc. at One Peso per share. RHC thereafter issued PDRs against most of the RI shares that it held to NBM Rappler and Omidyar. The subscription price for said PDRs was P181.6M, RHC allegedIy gained close to P162.5M from the transaction, which it failed to declare in its tax return.
On the other hand, the BIR accused accountant Baladiang of having violated Section 257 of the Tax Code for having certified the financial statements of RHC despite said corporation’s failure to disclose its purchase of RI shares.
In her resolution, Caparros ruled that in buying RI shares for the purpose of underwriting PDRs for resale to interested buyers, RHC acted as a middleman whose profits were taxable under the Tax Code. By not declaring such profits in its returns, the RHC has violated the Tax Code.
Caparros ruled that Ressa, as RHC president, should be held to account for such violation because Section 253 of the Tax Code makes a corporate president, among other officers, personally liable for such infraction by the corporation. Caparros brushed aside Ressa’s defense that the non-declaration of such gain was neither intentional nor willful, holding that a defense of lack of criminal intent is better ventilated during the trial proper.
Caparros dismissed the complaint against Bitanga upon Ressa’s certification that Bitanga was an inactive and nominal treasurer who did not participate in the management and operations of RHC.